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Ideation vs. Innovation

Like many people who live or work in London, I’ve been following the story about Transport for London’s decision not to renew Uber’s licence to operate.

I mostly get around the city on foot or by Tube, but I’ve used Uber there and in other places too. It’s a great service and simple to use, which explains the 40,000 drivers and 3.5 million people signed-up in the capital. In comparison, there are around 20,000 licenced black cabs operating in London. With so many cars on the roads, Uber seems virtually ubiquitous, so the shocked reaction when the news of TfL’s decision broke isn’t surprising.

As expected, Uber has appealed against the decision. The new CEO, Dara Khosrowshahi, seems eager to build a dialogue with TfL and avoid a legal battle that will cost money, absorb the management’s energy and waste time. Indeed, with competition in the mobility services space hotting-up, time is perhaps the commodity that Uber can least afford to waste. Taxify faced similar challenges from TfL as Uber did on their attempt to launch in London earlier this year, but are making progress in their bid to gain a licence. Lyft is attracting investment from major automotive firms like GM and Jaguar Land Rover, and has managed to avoid the kind of regulatory scrutiny and bad press that Uber has attracted over the past few months.

Given the number of Uber drivers on the roads and the size of the firm, valued at $68billion at its last funding round in 2016, it’s easy to think of Uber as an established company. In reality it still has plenty of maturing to do; accumulated losses of around $6billion and a subsidy model for drivers, which only yet appears to have created a fragile profit model in some cities, both attest to this. Ultimately, investors are betting that Uber will own the software and data that manages a massive global transport industry. With minimal capital costs and a large market share, the firm’s scale will create a network effect that will grow the business. That’s the vision, but there’s a long road ahead and plenty of competitors in the rear view mirror, if you’ll pardon the puns.

There are lots of insights to gain and lessons to learn from Uber’s journey so far, and particularly from the situation in London. For me, one of the most interesting is how it illustrates the difference between ideation and innovation. It’s one thing coming up with an idea, it’s another thing to put that idea to work so that it can grow and create value. This is a process that never truly comes to an end. As markets evolve, customer expectations change and technology develops, companies must keep adapting their products, services and brands to stay valuable to the people they serve. This process, and the recognition by the company that ‘the job is never finished’ is at the heart of what it means to be innovative.

Uber has arrived at an important landmark stage in its innovation journey. The company’s now large and high-profile enough to attract serious scrutiny from established regulatory authorities, and not just any regulator, but in TfL, one of the largest and most complex metropolitan transport authorities in the world. Uber challenges established models of transport provision and in its short history has made the industry and the public think differently about what mobility and vehicle ownership mean. This has created all kinds of possibilities for travel and stimulated an innovation effect across the transport industry as a whole. Uber has grown by thrusting into new markets and asking forgiveness, rather than permission, courting plenty of controversy along the way.

Part of the innovation effect Uber has stimulated is to encourage authorities to think differently about how mobility industries are regulated. This can create opportunities for established businesses, like taxi companies, as well as emerging firms like Uber, if they are willing to take the opportunity to adapt. But in the process of innovation, Uber must be prepared to adapt too and receive some of the wisdom of companies and authorities that have operated successfully in London and other cities for several decades. Innovation means not only the bold pursuit of an idea, but also the messy stuff of negotiating organisational politics and navigating through complex stakeholder networks. As the innovation grows these challenges become ever more real and harder to ignore. Yet they can also offer a great learning opportunity, training the firm in its capacity to absorb new ideas. So while Uber continues to provoke change, it could do itself a great service by working with, rather than against, authorities like TfL. It might be surprised by what it can learn from the experience.